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Costa Rica has been blessed with assets that virtually any country in the world would envy: stable government, twenty-some different micro-climates, low unemployment and an educated class that knows how to get the job done.

Yet, there are persistent questions about a saturation point in Costa Rica, where all the best labor is soaked up – especially in technical fields. For a country of just 4.1 million people, there is an impressive list of foreign companies with operations in Costa Rica. Oracle, HP, Intel and Cisco all have offices in Costa Rica and there are countless software development firms providing services to clients all over the world.

On my recent visit to Costa Rica – for the June Services Summit sponsored by promotion agencies CAMTIC and PROCOMER – it was clear companies are adapting to the skilled labor challenges by looking beyond borders throughout South and Central America to funnel business to other providers. This is an encouraging trend as the regionalization of service relationships is another shot in the arm to help drive BPO activites – and economies – in such places as Colombia, Panama and Nicargua.

Over 300 attendees make up this year's Services Summit. What's striking is there is literally no drop off - people are sticking around for the full conference.

The valuable part to blogging from a buyer/seller (corporate speed dating) event from a business journalist’s perspective is you have deeper conversations with a focused group of individuals. Unlike a conference with on-stage speakers and panels, this type of event seems to enable you to self-direct your own line of inquiry and test market your opinions.

Here are the key topics I’ve been driving and the collective responses (drawn from about two dozen in-depth conversations throughout the summit):

Question:How does Costa Rica rate among other nearshore nations?

Answer: Costa Rica is not a lowest-cost provider. The nation’s services industry continues on an upward trajectory toward higher levels of quality, specialization and niche professional capabilities. The services sector is intentionally designed to be dynamic and the nation’s education system is in fact set up to align to business requirements now and for the next generation of market demand.

Question: What is the hottest service sector right now?

Answer: CAD and architectural design is getting a lot of attention and the software development sector is filled with companies with a hard-core focus on differentiation and value-added service. Medical tourism, product development and patent and intellectual property research are doing well also.

Question:Costa Rica is increased looked at as a “hub” for nearshore outsourcing. What exactly does that mean?

Answer: Costa Rica is absolutely a shining light in the Nearshore region. The hub concept is starting to take shape in two ways – regional leadership (dozens of service provider companies from around the nearshore region participated in the Service Summit) and through an “aggregator” role – where business flows from client to the Costa Rica provider which manages the project/ relationship and selectively sources to other locations such at Panama and Colombia, based on need.

(My view: There continues to be a need for the Nearshore nations to come together more collectively as a block which will accelerate global awareness of the unique strengths of this region. Many observers expect CAFTA to enable some of that cooperation. Yet, to be honest, there is definitely a sense of competitiveness among the Nearshore Lions (Costa Rica and Mexico) and the Tigers (Jamaica, Colombia, Guatemala, Puerto Rico and Barbados). There is more talk of cooperation than real action.

Answer:Without question the weakest point for many of the providers in Costa Rica (the vast majority of them have under 50 employees) is sales and marketing. These companies generally need help developing targeted marketing campaigns and messaging that highlights their core value proposition. Reaching the US buyer is a top issue – since (at risk of oversimplification) the practice of Nearshore outsourcing is invisible to many US clients. PROCOMER is identified by many providers as a key faciliatator of awareness-building in the buyer audience.

Hotel San Jose Palacio is the site of the Costa Rica Services Summit, starting today. (Post script: Internet connectivity unfortunately has been a nightmare throughout the conference. We are confident PROCOMER will choose a different venue for the 2010 Services Summit.)

SAN JOSE, Costa Rica — Over 300 attendees from across the Americas and Europe are here this morning, and for the next two days, to strike up business relationships with Costa Rica service providers in four key sectors: health/ medical tourism; engineering and design; entertainment and media and IT and software development. Two Costa Rica economic development agencies – CAMTIC and PROCOMER – organized the event.

The event is largely organized around the increasingly popular corporate matchmaking process, where buyers (over 100 are here) meet the service providers in the various sectors.

Costa Rica has established itself as an early pioneer in outsourcing services and its maturation has positioned the country to go after niche, value-added services. I will be meeting with over a dozen service providers in IT and medical tourism and will follow up with more posts.

For further data and details on the Costa Rica services market – following this post. Continue reading →

ICT Group (which employs about 1,700 workers in Costa Rica, Mexico and Argentina) is yet another global proponent of Latin America outsourcing based on some remarks senior executives made on Wednesday about the company’s outlook and why centers in Latin America will play a bigger support role for clients. The company, based in Newtown, PA, brought in close to a half-billion in revenue last year and- like many in the BPO provider community – the firm is trying to leverage its higher margin offshore operations. Some highlights of the ICT analyst call (which is available in full text by clicking here):

Latin American operations provide for alternative offshore capacity for North American and European clients.

Companies are increasingly looking to outsource more of their non-core functions to reduce cost and they continue to prefer lower cost offshore solutions. Increasingly, they are looking for a second offshore geography particularly Latin America, so as not to put all their eggs in the Asian basket.

Latin American expansion: It’s earmarked for international development.